Portfolio Choice And Asset Pricing With Nontraded Assets
AbstractThis paper examines portfolio choice and asset pricing when some assets are nontraded, for instance when a country cannot trade claims to its output on world capital markets, when a government cannot trade claims to future tax revenues, or when an individual cannot trade claims to his future wages. The close relation between portfolio choice with and implicit pricing of nontraded assets is emphasized. A variant of Cox, Ingersoll and Ross's Fundamental Valuation Equation is derived and used to interpret the optimal portfolio. Explicit solutions are presented to the portfolio and pricing problem for some special cases, including when income from the nontraded assets is a diffusion process, not spanned by traded assets, and affected by a state variable.
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Bibliographic InfoPaper provided by Stockholm - International Economic Studies in its series Papers with number 417.
Length: 33 pages
Date of creation: 1988
Date of revision:
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Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.
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More information through EDIRC
financial market ; pricing;
Other versions of this item:
- Lars E.O. Svensson, 1988. "Portfolio Choice and Asset Pricing With Nontraded Assets," NBER Working Papers 2774, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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